Returned home and working remotely? Know your tax implications!

War clouds abroad are prompting many non-resident Indians to pack their bags and head home or at least to other safer shores – be it a second home in London or a vacation on an exotic isle. Airports across India are seeing a steady trickle of professionals arriving from West Asia, in some cases even the US, with laptops in tow, ready to work remotely while staying close to family. But while the move may offer emotional comfort, it also raises a question that few think about until later: what happens to their tax status if they move back to India? The India tax implications depend largely on residential status, which is determined by the number of days spent in India during a financial year (April–March) and in the preceding years. A person may remain a non-resident for tax purposes yet still find that part of their income (salary income for services performed while in India) becomes taxable in India. And in some situations, being a foreign citizen can make a significant difference.Gautam Nayak, tax partner at CNK & Associates said, “As countries move to plug tax avoidance through tightening of residence rules, the problem often may arise in genuine cases where a person is forced to spend more days in India due to geo-political events. The emergence of remote working coupled with the concept of residence based on physical presence in India has given rise to these problems, since these residence rules are meant for cases of physical work at the place of employment. People working in countries other than their place of primary employment need to carefully check the impact on their salary or professional income, in the country where they would be residing.”“If you are working remotely from India, the first thing is to get clarity on your residential status in India under the Income-tax (I-T) Act for the particular financial year. If you end up being treated as a Resident and Ordinarily Resident (ROR), India will tax your income earned anywhere in the world, though relief may be available under tax treaties to avoid double taxation. Even if you are a Non-Resident or Not Ordinarily Resident (RNOR), India can still tax the part of your salary that relates to work you do, while staying in India,” said Amarpal Singh-Chadha, tax partner and India mobility leader at EY India. “That said, Indian tax law and tax treaties do recognize short and temporary stays. If you meet the required conditions, such as staying in India only for a limited period (one of the conditions), you may not have to pay tax in India on that income,” he added.Here are a few illustrations: Mr. A was working in the UAE for several years and drawing a tax-free salary in Dubai. He arrived in India with his family in mid-February for a short vacation. With the situation in the region turning uncertain, his employer has allowed him to work remotely from India for a few weeks.His first concern was whether the extended stay would make him a tax resident in India. Under the I-T Act, an individual becomes a tax resident in a financial year if he satisfies any of the following conditions: Stay in India for 182 days or more during the financial year; or stay in India for 60 days or more during the financial year and 365 days or more during the four immediately preceding years.Ameet Patel, tax partner at Manohar Chowdhry & Associates, said, “For Indian citizens and Persons of Indian Origin (PIOs) who are outside India and who come on a visit to India, the 60-day limb is generally relaxed so that only the 182-day test applies, unless their Indian-sourced income exceeds Rs. 15 lakh. In such cases, the 60-day threshold is replaced by 120 days combined with the 365-day requirement over the preceding four years.”Since Mr. A has been living abroad for years and will be in India for less than 182 days during the financial year ended Mar 31, 2026, he would continue to qualify as a non-resident. At first glance, which appears reassuring.However, residential status is only the first step. For a non-resident, income that accrues, arises, or is deemed to accrue or arise in India is taxable in India. Because he will be rendering services while physically present in India, the salary relating to this period will be treated as income that accrues in India.In other words, despite remaining a non-resident, his salary for the period he works from India will be taxable here, this is a surprise for many who assume that non-resident status automatically keeps their foreign salary outside the Indian tax net.Contrast this with the situation of Ms. B, a US citizen who flew from Chicago to Kochi to be with her mother and will work remotely for a few weeks. During the financial year 2025-26, her stay in India will be around 15 days.Here, an important distinction comes into play: citizenship. The I-T Act provides a specific exemption under Section 10(6)(vi) for salary received by individuals who are not citizens of India for services rendered during a short stay in India, provided certain conditions are met, viz: The employer is not engaged in any business in India; the individual’s stay in India does not exceed 90 days during the relevant financial year; and the remuneration is not deductible from the employer’s income chargeable to tax in India, if any.The I-T Act does not separately define the term ‘short stay,’ but the clause itself makes it clear that the exemption applies where the stay does not exceed 90 days.Because Ms. B is a foreign citizen, she can avail of this exemption. This means her salary for the period she works from India during the financial year 2025-26 can remain tax-free in India, provided the above conditions are satisfied. She could even continue working from India in the next financial year for up to 90 days without triggering Indian tax on that salary. The contrast between the two highlights a nuance that often goes unnoticed.Two people may both be non-residents, both working remotely from India for foreign employers, yet the tax outcome can differ sharply depending on where the services are performed and whether the individual is an Indian citizen or a foreign citizen. However, individuals may still find protection under applicable Double Taxation Avoidance Agreements (DTAAs) – aka tax treaties. For instance, the India–US and India–UAE tax treaties provide relief under the provisions dealing with Dependent Personal Services (Article 16 in the India–US DTAA and Article 15 in the India–UAE DTAA). Broadly, these provisions allow salary to remain taxable only in the employee’s country of tax residence, even if the services are performed in the other country, provided certain conditions are satisfied.Under Article 16 of the India–US DTAA, salaries, wages and similar remuneration earned by a resident of one contracting state are taxable only in that state unless the employment is exercised in the other state. Where services are performed in the other country, that country may tax the remuneration unless the employee qualifies for the “short-stay exemption” under Article 16(2). This exemption applies if three conditions are cumulatively satisfied: The employee’s presence in the other country does not exceed 183 days during the relevant period; the remuneration is paid by, or on behalf of, an employer who is not a resident of that country; and the remuneration is not borne by a permanent establishment or fixed base of the employer in that country.“While such treaty provisions offer important relief, it is equally important to recognise that exposure under the I-T Act (domestic tax law) arises in the first instance, and the treaty protection must then be invoked to mitigate double taxation. Consequently, professionals who temporarily relocate to India and continue working remotely should carefully evaluate their day-count, the structure of their employment, and the potential applicability of treaty relief to avoid unintended tax consequences,” said Patel.A non-resident or RNOR is liable to tax in India, only on income that is earned or accrued in India. Foreign income is not taxable. Hence, it is important to understand what determines RNOR status. A person is considered RNOR in India for a given financial year if they meet the following conditions: The individual should be a resident (should satisfy both the conditions to become a resident and the individual has been a non-resident in India in nine out of the ten previous years preceding the relevant financial year or should have stayed in India for less than 730 days in the 7 years preceding the relevant financial year.A citizen of India, or a person of Indian origin, who has income exceeding Rs. 15 lakh from sources other than foreign income and has stayed in India for 120 days or more but less than 182 days during the relevant financial year.Another provision that may have unintended consequences for individuals returning to India is the deemed residency rule under Section 6(1A) of the I-T Act, introduced by the Finance Act, 2020. Under this provision, an individual is deemed to be a resident in India if three conditions are satisfied: the individual is an Indian citizen, total income (other than income from foreign sources), exceeds Rs. 15 lakh during the relevant financial year; and the individual is not liable to tax in any other country or territory by reason of domicile, residence, or similar criteria.Importantly, this rule operates independently of the number of days spent in India, meaning that even a relatively short stay in the country may potentially trigger residency under this provision. Individuals covered by this rule are classified as RNOR under Section 6(6). As a result, while their Indian-sourced income remains taxable in India, their foreign income generally continues to remain outside the Indian tax net, subject to limited exceptions.Patel provides an illustration: Consider the case of Mr. C, an Indian citizen employed with a company in the UAE who returns to India due to geopolitical uncertainty and stays in India for about 90 days during the financial year 2025–26. During this period, he continues to work remotely for his UAE employer and earns a salary of Rs. 20 lakh. Since the services are rendered while he is physically present in India, the salary attributable to this period may be regarded as income accruing in India. If such income exceeds Rs. 15 lakh and Mr. C is not liable to tax in any other jurisdiction, the deemed residency provision may apply, resulting in his classification as RNOR for that year.“This illustrates how, even with a relatively short stay in India, the interaction of domestic tax rules can create unexpected residency implications, underscoring the need for individuals working remotely from India to carefully assess both their income profile and tax exposure,” said Patel.As remote work becomes more common and global uncertainties continue to push people across borders, these fine distinctions in tax law are becoming increasingly relevant for professionals who find themselves temporarily working from India while the world outside remains unpredictable.